Creating a trust is often best done with the help of an estate planning attorney. This person will help you understand different kinds of beliefs and which one may be the most suitable for your situation. You’ll also need to determine the parameters for how and when you want assets distributed. This could include restrictions and specific parameters for certain beneficiaries.
Know Your Role
Creating Trust takes time and effort. Depending on your goals and the size of your estate, this could be a major undertaking. It will take longer if your assets, such as real property or other financial investments, require a complicated transfer process. It may also be more complex if you want to use the Trust to qualify for long-term care or leave certain assets to beneficiaries at specific times. The first step is to understand your role. The grantor (the settlor or trust maker) is responsible for setting up a trust and determining its terms. Married couples often choose to be co-grantors and co-trustees so that both can manage the assets. You will also need to identify your beneficiaries, the people you wish to receive your trust assets. This could be your children, spouse, friends or a charitable organization. You will also need to decide whether you want to appoint someone with legal rights to your assets outside the Trust (known as a power of attorney). This person can make decisions for you should you become disabled or die.
Decide on a Trustee
It would help if you chose a trustee (or multiple trustees). This is an important decision. Trustees have a big responsibility; their duties may last years or decades. They must comply with the terms of your Trust and make decisions according to them. They also must be able to manage assets and make investments. They can be a family member or someone you hire to take on the role. If you select one family member as a trustee, they must be on good terms and ready to work together. Choosing estranged siblings as co-trustees is not recommended. They must collaborate by signing checks and documents and coordinating with investment advisors. This can create tension and a lack of trustworthiness.
Your trustee should be able to think logically and be unbiased in making decisions. They should not be influenced by family dynamics or by heirs who try to exert influence over them. Having financial experience is beneficial but only sometimes a requirement. Most importantly, your trustee should be able to devote the time and effort to perform their duties.
Create a Beneficiary Designation
Many assets that transfer upon your death allow you to specify a beneficiary. This is common for life insurance policies, IRAs and savings accounts. These assets may be transferred to your estate without a beneficiary designation and subjected to probate. To designate a beneficiary, contact the company holding your asset and fill out a form they provided. Often, this can be done through an online portal. Giving the beneficiary’s full legal name and relationship with you is important. The information is required to verify the beneficiary and to locate them if necessary. You are identifying contingent beneficiaries who will receive the asset if the primary beneficiary predecease is also a good idea. This provides for greater control of the distribution to your family members. It is a good practice to review your beneficiary designations regularly, particularly after major events such as divorce, remarriage or the death of a loved one. Consider a disclaimer if you wish to decline the benefit of a particular account or asset.
Transfer Assets to the Trust
Trusts are powerful estate planning tools that offer many benefits. They can help avoid probate, lower taxes and ensure that your legacy is carried out exactly how you want it to be. However, establishing Trust is more complex than drafting and signing a document. Working with an attorney to prepare and execute your Trust is important. While you may find prepared forms and kits, they often need to address your unique situation and can lead to mistakes that may be costly.
You will also need to transfer all assets into the Trust. This can be done in various ways depending on the type of asset. For example, if you own real estate property, you must file a new deed with the county recorder’s office in the name of your Trust. If you have investment or bank accounts, you must contact the institution and request a change of ownership in your Trust’s name. It is also helpful to draw up a trust schedule or informal inventory of all your assets. This will make it easier for your trustee and beneficiaries to identify and locate all purchases in the Trust.
Create a Trust Agreement
The next step is creating a trust agreement describing how funds and assets will be handled. This is done by the trustees, who are bound by law to follow the grantor’s wishes as expressed in the trust instrument. The trust instrument will also specify the trustee’s responsibilities and latitude, list the beneficiaries and their assets, and instructions for final distribution and trust termination. The Trust can be set up for a specific period or in perpetuity. You can also add parameters on how the trust funds will be distributed, such as when your children reach certain ages or attend college, and you can even set up provisions for dispersal items like art, jewellery or collectables. A qualified estate planning attorney and your trustee can help determine the best parameters for your circumstances. While trusts may seem geared more towards high-net-worth individuals and families, they can be useful for people of all income levels, especially those who want to avoid the expense and hassle of probate and retain control over their heir’s inheritance.
